Research reveals 125,000 more workers to pay National Insurance in Sunak “stealth tax”

  • Nearly 125,000 more workers to be dragged into paying National Insurance next year, new research reveals.
  • Failure to increase the minimum threshold in line with inflation means workers and employees face an eye-watering £2.4 billion tax bombshell.
  • Small firms to be hit hard as businesses set to begin paying National Insurance on 200,000 more employees.

The Chancellor Rishi Sunak has been accused of clobbering the country with yet another stealth tax, as new figures reveal 125,000 workers will be dragged into paying National Insurance next year.

The analysis from the House of Commons Library, commissioned by the Liberal Democrats, looks at the impact of the government’s failure to increase the minimum earnings threshold at which people start paying National Insurance in line with inflation. 

The current minimum threshold is set to rise to £9,880 in April, an increase of just 3.1%. This is based on September’s inflation figure before energy bills began to rocket. 

The research shows that 135,000 more lower earners will pay National Insurance compared to if the earnings threshold was increased by 7.25%, the current rate of inflation for April as forecast by the Bank of England. This figure is made up of 95,000 employees and 30,000 self-employed workers.

In addition, millions more families will pay more tax on their earnings as a result of the move. Employees face a total hit of £1.1 billion because of the Chancellor’s refusal to increase the earnings threshold in line with inflation. The average worker on earnings of almost £32,000 will pay an extra £48 more in taxes a year, or almost £100 for a family with two middle-income earners, coming on top of the massive tax rises already announced by the government.

This move has been slammed by the Liberal Democrats as “yet another stealth tax”, clobbering families who are already facing the biggest squeeze on living standards in decades. The changes will also place a huge burden on employers, who will have to cough up an additional £1.2 billion, as they’ll be required to pay National Insurance on 200,000 extra workers’ salaries. Employers will face an extra hit of £850 per year as a result of the stealth tax.

The Liberal Democrats are demanding the Chancellor scrap this tax bombshell on low earners and employers by raising thresholds in line with inflation, while scrapping the unfair hike on National Insurance. The party is also calling for a boost to families and businesses through an emergency cut to VAT from 20% to 17.5%, saving households an average of £600 next year.

Liberal Democrat Treasury Spokesperson Christine Jardine said: “Families are facing the worst squeeze in living standards in 50 years, but the Conservatives are clobbering people with yet more stealth taxes.

Christine Jardine MP

“This unfair move will drag thousands more people into paying tax, while millions more will see their tax bills rise yet again next year. Meanwhile small businesses struggling to stay afloat face a hidden tax on their employees’ salaries.
“It is rubbing salt in the wound of the government’s broken promise not to raise National Insurance. Rishi Sunak must spike the hike, and offer families and businesses a lifeline by slashing VAT instead.”

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